How To Get A Good Deal On A Used Car

Why should you buy a used car? A new car will depreciate about 10% the moment it leaves the lot and another 20% within its first year. After three years, the average car is worth about 60% of what it was when new. That might be depressing news for the original owner, but it represents a screaming deal for the prudent used-car buyer.

A one- to three-year-old car will likely still be under the manufacturer’s warranty, and unless it has been abused, it is likely to offer many more years of good service. Also, consider that the used car marketplace is huge — about 43 million used vehicles change hands each year, dwarfing the 17 million in new car sales.

Research First

“Do everything you can before physically going to buy the car,” said Philip Reed, a senior consumer advice editor at automotive review site Edmunds. That means researching what make and model you are interested in and how much they sell for in your area. By researching specific vehicles that have the features and mileage you are looking for, you introduce competition to the car-buying process. A seller might not match the lowest price you find, but it cannot hurt to ask.

Edmunds is a good resource for auto shoppers. It, along with Kelley Blue Book and National Automotive Dealers Association, track new and used car purchases to provide granular pricing information. “We collect tens of thousands of transactions per week from wholesale auctions, dealers both large and small, vehicle registration data, listing data and other sources,” said Alec Gutierrez, a senior analyst for Kelley Blue Book, of his organization’s process. “This data is then cleansed, normalized and run through a statistical modeling process.”

Check It Out

Once you have determined what you want to buy, and what they sell for, it is time to check out the car, take it for a test drive and make sure everything the seller says about it is true. Get the vehicle history report (Carfax and AutoCheck are two popular choices) to confirm the odometer reading, ownership history and reports of accidents and flood damage. (For more, see: 10 Tips for Buying a Car Online.)

Private Sellers

When shopping, note that dealers usually charge at least 10% more than private sellers. Most people selling cars are not professional salespeople and are not as skilled at haggling. Also, they might be moving, or, having purchased a new car, need to make space in the driveway. Before you hand a private seller your money make sure they have signed the title (also called the pink slip) over to you. You will also need to insure the car before you drive it away. It is a less structured process than buying from a dealer, but if you are looking to save as much as possible, and if you trust the seller, a private party purchase could work. (For more, see: How to Get the Best Deal When Buying or Selling a Car.)

Dealers

Sure, it is a markup, but that dealer’s markup can come with substantial advantages. First off, it is easier to shop a range of cars from a dealer’s lot than schlepping all over town to cross-shop individual sellers. Dealers are also more likely to clean and perform a basic inspection of a car, plus they are governed by Federal Trade Commission rules as well as state and local regulations. “If you buy from an established business, it has a reputation to uphold,” Reed said. “In many instances, they will also offer some sort of warranty — even if it is only for 30 days.” Buyers should ask how warranties will be honored and where any needed repairs will be made, however.

Certified Pre-owned

Certified pre-owned (CPO) are offered by most luxury brands, such as Lexus, Lincoln and Mercedes-Benz, but also mainstream makes such as Nissan and Chevrolet. CPO vehicles are thoroughly inspected, any maintenance issues are addressed, and they are cosmetically sound — no shredded interiors, bashed fenders or missing trim. When talking to a dealer (by their nature, certified cars are sold through dealers, not private individuals) about a certified car, have them show you its inspection report, which will list all of the areas checked, whether or not there were any recalls on the model and even details such as tire tread depth and the thickness of the brake pads. CPO cars tend to have less wear and tear. Mercedes, for instance, will only certify cars six years old or less, with fewer than 75,000 miles. The German brand then adds a year and unlimited miles to whatever initial warranty is left, plus 24-hour roadside assistance, trip-interruption protection and service loan cars. (For more, see: Cars That Depreciate in Value the Most.)

You pay extra for CPO cars, however. “There is usually a $1,000 premium,” Reed said. “But you are getting the cream of the (used car) crop. It turns used-car buying into a new-car-buying experience.”

Like new cars, CPO vehicles are best purchased at the end of the month, when dealers are looking to make quotas and are more receptive to haggling. Regular used car sales are not generally cyclical this way, though timing can still be employed. For instance, if you live in an area that gets a lot of snow, you’ll likely get a better deal on a convertible in the fall and winter months. Conversely, there is usually an uptick in all sales around April, when people blow their tax refunds, so avoid shopping then, if possible. (For more, see:5 Tips for Dealing with Car Dealers.)

Don't Count out the Discontinued Model

Buying a car that’s been discontinued or slow selling is another good option. Dealers have a finite amount of space and will heavily discount these vehicles to make way for new models. I bought my 2006 PT Cruiser convertible in 2007 at slightly over half the $30,000 list price. It only had 12 miles on the odometer and was a used car in name only, but after months languishing on the dealer’s lot, he was ready to make a deal.

The Bottom Line

If you know what you want and what it should cost, you are halfway there. Check NADA, Kelley Blue Book or Edmunds for pricing information. Both dealers and private sellers have their advantages and disadvantages, but thoroughly inspect and test drive any car prior to purchase, and get its vehicle history report. For a nearly new used car, CPO programs and leftover models are worth a look. (For more, see: 5 Ways to Buy a Used Car.)

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